Monthly Archives: May 2011

(Note: for related articles that precede this one, please visit this post.)

June 10, 2003

Sooman Lee and Sewon Seo, key suspects in the investigation on corruption in the entertainment business, who brought the investigation to a standstill when they fled the country and were subsequently placed on Interpol’s Wanted List, finally returned to Korea. Thus, people expected that the case, which had been suspended for six month, would resume, but the result came to nothing. Sewon Seo had delayed a summons of the Prosecutor’s Office on grounds of poor health, and Sooman Lee, who was summoned right after his re-entry, was allowed to go back home in a day. Although the Public Prosecutor, for now, states that his office will decide whether or not to issue a warrant for Sooman Lee and Sewon Seo’s arrest after going through the enormous amount of data received and further investigation, the case seems to be closed without any further pursuit.

Why request a place on Interpol’s Wanted list if they will release suspects in a day?

On the 22nd of last month, Sooman Lee, the principal shareholder of SM Entertainment, entered Korea quite confidently surrounded by ten bodyguards after being arrested at Incheon International Airport. This quite contrasted with Sewon Seo’s entry, carried by gurney as he was trying to hide his face. Sooman Lee headed to the Seoul District Public Prosecutors’ Office after asserting his innocence. One day after the entry of Sooman Lee, the serious crime squad of the Seoul District Public Prosecutor’s Office (HongIl Kim, chief prosecutor) announced that for now they would send Sooman Lee home, and then will decide whether or not to issue an arrest warrant for Sooman Lee after conducting further investigation. The Public Prosecutor’s explanation for sending Sooman Lee home was that, because SM’s lawyer has completely denied the suspicion of Sooman Lee by providing enormous amount of data, such as receipts, the Prosecution had to do more corroborative investigation. The public cannot understand how Sooman Lee could be sent home in a day after being wanted by Interpol while he had long been escaped in the US. The investigation of the entertainment business’s corruption that heated up the public last year solves nothing and just leaves people with many suspicions. In the beginning, the investigation confidently planned to go through the whole entertainment business’s corruption, embezzlement, stock price manipulation, an influx of funds from organized criminal gangs, an illegal capital for public relations, and sexual bribes. However, the outcome is inadequate. While the Prosecutor’s Office went through the humiliation of having the chief prosecutor replaced in the middle of the investigation, they stated that if Sooman Lee and Sewon Seo would return to Korea, the Prosecutor’s Office can achieve tangible results. In August of last year, the Prosecution dismissed an indictment of Sooman Lee, and this year, 14th January, Lee was placed on Interpol’s Wanted list and the Prosecution revealed the strong will to investigate this case. However, Sooman Lee’s returning to Korea ended up with just a day of investigation.

Many suspicions so far, and Sooman Lee’s insistence

At the time of last year’s investigation, the charges against Lee are listed below.
First of all, he was suspected of profit-taking in KOSDAQ by adopting an expedient. By this expedient, the prosecution assumed that Lee pulled in approximately $13,000,000 by stock of SM entertainment. In addition to Sooman Lee’s suspicion of earning ten million of margin profit from the merger with 4M Entertainment’s training agency which costs $50,000, Lee was also under suspicion of taking $3,000,000 of cash income by selling stock of KOSDAQ in May of last year.
However, the prosecution had been more focused on the investigation on the embezzlement which occurred in the company. Especially, in August of 1999, the Public Prosecutor stated that Lee had embezzled $1,100,000 in the form of foreign payment of capital which was embezzled in the process to increase capital. The Prosecution said they were investigating the use of the $1,100,000.
The problem is that while Lee stayed abroad, Kyeongwook Kim, an executive of SM entertainment, was indicted for those crimes in Lee’s stead, but he was acquitted to part of those crimes. Thus, the indictment on Lee could only become more complicated.
Last year, the investigation on entertainment corruption was launched based on allegations of “PR fees”(T/N: Euphemism for bribes, including those of a sexual nature). The whole investigation was started by one NGO group, Solidarity Groups for the Reform of Popular Music (i.e. DKR), which reported the practice of entertainment companies exchanging “PR fees”. After that report, the Prosecutor’s Office said that they would investigate the PR fees related to SM entertainment. However, as the investigation proceeded, the issue of PR fees gradually disappeared, and the Prosecution did not even mention PR fees when they recently summoned Lee.
Last year, during the investigation, our newspaper revealed a list of SM Entertainment’s stockholders. In the list, financial firm _____’s Lee chairman had 6,000 shares, Pastor Choi had 40,200 shares, and other entertainers and representatives of broadcast stations were also on the list. For this reason, based on the stockholders’ list, Prosecutors suspected high instances of bribery in the form of PR fees between the entertainment world and the political world.

The investigation related PR fees make a slow progress

The most unsatisfying part about this investigation from the point of view of the entertainment industry is the loss of focus on PR fees. This bribery issue was the most important part in last year’s investigation, and everyone had expected that this investigation of the entertainment industry could be a turning point for reforming the practice of PR fees which had been the reasonable custom so far. However, the prosecution actually failed to disclose the true nature of this bribery. Therefore, when Sooman Lee, and Sewon Seo, who were the key suspects of the investigation, returned to Korea, people expected the Prosecutor’s Office to proceed into the inquiry on PR fees. However, the actual prosecution’s investigation focused on the manipulation of stock or embezzlement. These parts could be the tangible accomplishments for the Prosecutor’s Office, but these would not help the basic structural reform of the entertainment business world. Cultural Action and DKR, the non-government organizations which did demonstration against Sooman Lee, insisted that “the Prosecution’s investigation is essential to construct a transparent structure for the entertainment industry”. The organizations also asserted that “we express our concern over the slow progress of the investigation that had been proceeding since last year.” Especially about the part on PR fees, the Chairman of DKR stated that “the slow process of the investigation is a shame. It appears that the investigators did not even consider our report” (related reference in his interview)
Lee has denied all suspicions put on him. He explained about the embezzlement in the company that “I embezzle nothing. I already submitted related data to the prosecution last week. He also asserted his innocence of price-taking by selling stock saying that “How can I make the profit even when I did not sell the stock? There was no advantage of selling stock because the stock price had dropped at the time.” Seong Il Baek, a lawyer of Sooman Lee, already passed an enormous amount of data to the Prosecution, and he still keeps providing additional data.

Continue to suspect Lee’s capability to be well informed

In the contrast to the prosecution’s attitude near the start of the investigation, they sent Sooman Lee home in one day as Lee submitted related data.
Therefore, the prosecution is being denounced by the public for their incapability to make a clear and obvious result of the investigation. As a result, the prosecution suddenly became the target of denouncement for making an abrupt decision before they made an agenda; the abrupt decisions such as dismissal of the indictment, requesting the assistance of Interpol, and nullifying Lee’s passport. Besides, between reporters, who cover the process of questioning Sooman Lee, there were already some suspicions that the Public Prosecutor was going to finish the case without any results. The Prosecution’s will to investigate further seemed weak. In this whole process, there is some suspicion about Lee’s personal connections and his capability of gathering information. Because Lee went to Kyung Bok high school and Seoul National University where many graduates are now influential legal/judicial circles now, people are speculating that Lee received information secretly from his alumnus right before leaving Korea. People also assume that there could be some pressure from Lee’s alumnus to finish the investigation on Lee in just one day.
About this, Dong Yeon Lee, a chairman of DKR, said that “a plea written by Lee’s alumnus appears to have been quite effective.”
There are three possibilities in the entertainment world now. First, the investigation itself was lacking in substance. Second, the Prosecutor’s Office was inadequate to dig up the truth. Third, there could be external pressure from third parties to help Sooman Lee out of the investigation.
So far, this investigation summoned the largest number of related persons and proceeded in the widest scope. However, the investigation lasted for one year seems ineffective to reform the wrong custom such as PR fees in the entertainment world.

We—as international consumers of the Korean Wave, supporters of JYJ and citizens of the world that value justice and the rule of law—hereby condemn the official statement issued by Korean Broadcasting System (hereafter, “KBS”) on 18 May, 2011 regarding its reasons to prohibit JYJ from appearing on “Music Bank” and other such entertainment programs. We declare the statement to be factually incorrect, intentionally misleading and provoking of international disdain.

The Courts of Korea have already declared multiple times that the exclusive contract between JYJ and SM Entertainment has no effect during the duration of the lawsuit, that for reasons of social and civil security it cannot be allowed to stand, and that it shall not be invoked as a reason to hinder the careers of the members of JYJ. Since 2009, the Seoul Central District has continuously affirmed this stance, which renders KBS’ hastily modified claim that its own position has changed since February 2011 a case of obstinate blindness and self-mockery. Ultimately, any attempt by KBS to use the exclusive contract and the lawsuit between JYJ and SM Entertainment as a justification for prohibiting JYJ’s media appearances run contrary to the explicit mandate of the Court and is a mischaracterization.

At the same time, we look forward to KBS honoring its commitment to broadcast JYJ on Music Bank when the group’s new album is released.

KBS also claims that, regardless of whether or not Korean law has vindicated JYJ, the mere fact of JYJ’s involvement in legal proceedings bars the group’s appearance on Music Bank, since allowing the group’s appearances could “unfairly influence the outcome of the ongoing lawsuit”. Since it necessarily takes two sides to make a lawsuit, this logic necessarily mandates that KBS bar all appearances by any affiliates of SM Entertainment, who is the other party to this lawsuit. We look forward to KBS showing the minimum of logical consistency and barring SM Entertainment to the same degree that it bars JYJ.

KBS’ claims also are carbon copies of those made by the Korean Federation of Pop Culture and Arts Industry (KFPCAI) in October of 2010. KFPCAI, of which SM Entertainment is a prominent member, argued that to allow JYJ’s media appearances would negatively affect Korea’s cultural development and the Korean Wave. We express disappointment that KBS, a public broadcasting station, has chosen to prove itself to be complicit with KFPCAI. In doing so, KBS has demonstrated to the international public the degree of collusion in the Korean entertainment industry that is directly bringing harm to consumer protection, free and fair market competition, artists’ freedoms and Korea’s long-term cultural development.

Lastly, we urge the Government of the Republic of Korea to take action to show that its legal system has the bare minimum of force and significance. The rule of law is not simply a part of State sovereignty; the rule of law is State sovereignty. If the Government of the Republic of Korea does not take action against those who publicly and prominently violate its rule of law, any claim it makes to State sovereignty will ring hollow to the growing audience of the international public.

We continue to hope that our trust in the Government of the Republic of Korea is not misplaced.

Note: On its statement, KBS argued that JYJ is engaging in “dual-contracting” among others. This is factually incorrect, because the JYJ-C-JeS contract is not an exclusive contract and also because the JYJ-SM contract is now null and void.

The below is a translation of the court decision that dismissed SM’s petition for the court to strike down the business relationship of JYJ and C-JeS as dual contracting. The Korean original is posted at DNBN, found here.

Notice the brevity of the court’s opinion. This petition was so without merit that it barely warranted a page to refute it in multiple ways.

Regarding Jejung, Yuchun, and Junsu’s (hereafter JYJ) situation in Japan, ever since the sudden and unilateral announcement in September 2010 by their current management company Avex to suspend their activities, JYJ have been unable to have activities in Japan.

In spite of the Japanese fans continuously sending requests to Avex for the resumption of the three’s activities in this past 8 months, till now we have not even received acceptable explanations for the suspension, and we are at our wits’ end for ways to have JYJ’s activities resumed.

Moreover, Avex went as far as to use contract problem as a reason, to prevent JYJ, saddened by the March 11th earthquake that badly damaged Japan, from holding a charity event purposed to help revive the disaster-stricken areas.

This event, represents JYJ’s well-wishing for Japan after many years of doing activities here, and in addition to sending donation, is a segment of their effort expressed immediately after the earthquake to encourage Japan.

The Japanese fans are grateful for JYJ’s love for us, we want to meet JYJ from the bottom of our hearts, and we are eager to listen to JYJ’s singing.

We, Japanese volunteer fans of JYJ, have sent Avex a demand letter which demanded for the resolution of the unreasonable suspension of JYJ’s activities, and to have JYJ freely conduct activities in Japan.

We ask for the kind understanding and support from worldwide fans of JYJ for this demand letter of ours.